Lines of Communication…
Welcome to our June 2019 newsletter & an update on the recent developments & issues facing us all as we reach the end of the second quarter of the year. Winter appears to be with us, & therefore a good time to keep warm & provide a commentary on current market trends.
These are challenging times for both an insured & insurer in those areas of New Zealand considered at risk to natural disasters. Some could say this is most of the country & there is no doubt for a small nation we have some very large exposures.
Christchurch & Kaikoura raised the awareness of the potential for widespread damage from Earthquakes, even in areas not thought to be most at risk. Add flooding, driven to near extremes by climate change, & there is plenty to cause concern for insurers.
Their response has been measured to date, but they are changing the way risk is viewed. With far greater access to data, risks can be analysed in great detail. Averaging the risk across the country is on the way out; instead pricing individual properties according to their specific risk profile is becoming more the norm.
In fact Tower insurance have created a new term called granular underwriting, which essentially means like grains of sand through your fingers, they are no longer interested in high exposure risks & moving them out of their book. We as brokers are talking through any issues with our client upcoming renewals well in advance of expiry to avoid surprises at the last minute & managing expectations.
The media are taking notice of what is happening & highlighting the increasing Earthquake risk exposures, for example particularly with Wellington homes & apartments. I have received calls asking why this is happening. Many ask is the time for a government insurer the answer?
Regretfully of course it is not, because the government cannot afford to cover the risk. It would need to turn to the same international reinsurance market as the local insurers do.
New Zealand has been very lucky. Despite being one of the most risky environments for natural disaster, we can still obtain insurance. Compared to similar at risk areas like California, Japan, or Turkey, & still receive reasonable terms for the risk exposure. But this is changing…
As well as managing claims, our job is informing clients to the realities of the market place. We are becoming even more proactive when it comes to renewals. Many of the observations I have noted relate to an insured finding out their insurance is going to cost far more, or the excess is substantially higher. Worst case, the cover they had previously is no longer available. This is becoming a reality, & insurers are often unwilling to negotiate.
Communication is the key to ensuring everyone involved is on the same page & we mutually have time to organise solutions to the coming changes.
Should you have any enquiries regarding these changes & developments, or just simply wish to check adequacy of your existing levels of covers, then please call us. We look forward to speaking with you all again soon.
With my best wishes & kind thoughts,